JD.com (NASDAQ: JD) and Alibaba (NYSE: BABA) are behemoths in the Chinese e-commerce landscape. JD.com, the country’s top direct retailer by annual revenue, stands face-to-face with Alibaba’s Taobao and Tmall, the leading third-party online marketplaces in China.
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Comparing and Contrasting
JD.com primarily thrives on its first-party marketplace while lately venturing into third-party operations to capture a broader merchant and customer base. On the flip side, Alibaba’s Taobao bridges consumer-to-consumer transactions, while Tmall caters to larger merchants and brands in the third-party segment.
Both JD and Alibaba manage their logistics via in-house subsidiaries, offering end-to-end fulfillment services. In 2021, JD listed its logistics arm, JD Logistics, in an IPO. Meanwhile, Alibaba reconsidered a similar move with its Cainiao logistics unit earlier this year.
Unlike JD, Alibaba has expanded its footprint beyond China, with key holdings like Lazada in Southeast Asia, Trendyol in Turkey, and AliExpress in cross-border trade. In addition, Alibaba boasts Alibaba Cloud, China’s top cloud infrastructure platform, while JD weaves its cloud, fintech, and healthcare platforms under the “new businesses” umbrella.
The Race of Growth
JD’s revenue trajectory witnessed a sharp ascent of 28% in 2021, yet gradually slowed to 4% in 2023 due to China’s zero-COVID strictures, sluggish economic growth, and stiff rivalry with PDD and Alibaba. Attempting to match PDD’s pace, JD introduced Jingxi, a discount marketplace, before truncating the project in 2022 underperformance. Forecasts predict a 5% revenue upswing in 2024 as market conditions stabilize.
Contrastingly, Alibaba saw revenue spike 19% in fiscal 2022, dipping to 2% in fiscal 2023, and rebounding to 8% in fiscal 2024. Concurrent macro and competitive hurdles with JD were compounded by an antitrust squeeze in 2021, halting exclusive deals and cutting loss-making promotions. As the clouds part, a projected 8% revenue jump in fiscal 2025 beckons, propelled by China’s economic steadiness and sustained overseas expansion.
Notably, PDD boasted a staggering 61% compound annual growth rate from 2020 to 2023, with analysts pegging a 68% surge in 2024. The acceleration is largely pinned on the growth of its online agricultural hub and Temu, the cross-border marketplace eyeing a slice of Amazon’s U.S. supremacy.
The Profit Margins Tale
JD, reliant on its capex-heavy first-party marketplace, operates at thinner margins than Alibaba, serving a third-party clientele. Over the past three years, both titans honed their margins with stringent cost controls. JD’s EPS witnessed a twofold spike in 2023, and analysts foresee a 28% ascent in 2024. On the other end, Alibaba’s EPS climbed 14% in fiscal 2024, with an estimated 34% mount in fiscal 2025.
With JD priced at a modest 10 times forward earnings and Alibaba marginally higher at 13, both stocks remain undervalued. Yet, escalating geopolitical tensions between the U.S. and China keep valuations constrained, awaiting a thaw in the strained relationship.
The Finer Pick: Alibaba
While both JD and Alibaba stand to rebound if U.S.-China relations mellow, Alibaba’s diverse portfolio and nimble growth projections paint a brighter turnaround picture. In contrast, JD might grapple to widen its moat and broaden its horizons beyond the core online sphere.
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